SORIA COMPANY Clothing Department Budget Report For the Month Ended October 31,

Question

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2014

Difference

Budget

Actual

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

8,400

9,900

1,500

$1,932

$2,475

$543

1,260

891

369

3,696

3,861

165

1,848

1,386

462

8,736

8,613

123

1,900

1,900

–0–

1,400

1,400

–0–

800

800

–0–

500

500

–0–

4,600

4,600

–0–

$13,336

$13,213

$123

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SORIA COMPANY
Selling Expense Flexible Budget Report
Clothing Department
For the Month Ended October 31, 2014

Difference

Budget

Actual

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October.

SORIA COMPANY
Clothing Department
Budget Report
For the Month Ended October 31, 2014

Difference

Budget

Actual

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

Sales in units

8,400

9,900

1,500

F Variable expenses     Sales commissions

$1,932

$2,475

$543

U     Advertising expense

1,260

891

369

F     Travel expense

3,696

3,861

165

U     Free samples given out

1,848

1,386

462

F        Total variable

8,736

8,613

123

F Fixed expenses      Rent

1,900

1,900

–0–

N      Sales salaries

1,400

1,400

–0–

N      Office salaries

800

800

–0–

N      Depreciation—autos (sales staff)

500

500

–0–

N        Total fixed

4,600

4,600

–0–

N Total expenses

$13,336

$13,213

$123

F
As a result of this budget report, Joe was called into the president’s office and congratulated on his fine sales performance. He was reprimanded, however, for allowing his costs to get out of control. Joe knew something was wrong with the performance report that he had been given. However, he was not sure what to do, and comes to you for advice.

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Explanation / Answer

Soria Company Selling Expenses Flexible Budget Report Clothing Department For the Month ended October 31, 2014 Budget Actual Difference 8400 Units 9900 Units 9900 Units A B = (A/8800)*9900 C D = B - C Variable Expenses Sales Commissions          1,932                    2,277          2,475              198 U Advertising Exp.          1,260                    1,485             891              594 F Travel Expenses          3,696                    4,356          3,861              495 F Free Samples given out          1,848                    2,178          1,386              792 F Total Variable Expenses          8,736                 10,296          8,613          1,683 F Fixed Expenses Rent          1,900                    1,900          1,900                 -   N Sales salaries          1,400                    1,400          1,400                 -   N Office Salaries              800                       800             800                 -   N Depreciation - Autos (sales staff)              500                       500             500                 -   N Total Fixed Expenses          4,600                    4,600          4,600                 -   N Total Expenses        13,336                 14,896       13,213          1,683 F

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